Over the past several years, crowdfunding and personal fundraising have become popular ways to raise money for people in need. Crowdfunding cuts out the charitable middleman, allowing a person or organization in need to appeal directly to the general public via the Internet in the hope of raising money for a cause or in response to a calamity. In many cases, crowdfunding campaigns take place when a family member has a medical emergency and needs help paying the bills or when a natural disaster wipes out a family’s home. Unfortunately, when crowdfunding sites are established for people with special needs who are receiving disability or medical benefits, even with the best of intentions, things can go wrong.

The Social Security Administration does not have a fixed policy regarding crowdfunding sites and Supplemental Security Income (SSI) benefits, but its treatment of other resources illustrates the problem with crowdfunding accounts. In the first place, if an SSI or Medicaid beneficiary establishes a crowdfunding account on his or her own and the beneficiary has access to the funds in the account directly, then it is likely that those funds are going to be considered a countable resource for SSI and Medicaid purposes, even if the language of the crowdfunding page limits what the beneficiary can use the money for. That’s because there really aren’t any rules when it comes to crowdfunding — once someone makes a donation, it doesn’t matter what the pitch to donors said, the beneficiary of that donation can use the funds in any way he or she chooses. As a result, the SSA will most certainly count funds in a crowdfunding account established by an SSI beneficiary as the beneficiary’s money, as will most state Medicaid agencies.

Things get a little more complicated when dealing with accounts set up to help somebody else, as is often the case when a family member suddenly dies and an account is established to take care of her children or when someone is critically injured and people want to help with the costs of care. In these situations, the argument can be made that the crowdfunding account is not the beneficiary’s resource, provided the SSI or Medicaid beneficiary doesn’t have direct access to the funds. But because the SSA hasn’t promulgated specific rules governing these accounts, it’s impossible to know for sure that funds in a crowdfunding account won’t be counted against a beneficiary even if he can’t access the funds himself.

Instead of creating a crowdfunding account in these situations, it’s much better to create a special needs trust to hold funds to care for a beneficiary. Although creating a trust requires more work initially, properly drafted trusts are clearly exempt from SSI and Medicaid resource restrictions and could offer much more flexibility in the long run. In fact, some donors who want the convenience of crowdfunding with the benefits of a trust will set up the special needs trust first and then make it the beneficiary of the crowdfunding account. In any case, before opening an account for a person with disabilities, make sure that you discuss the matter in detail with your special needs planner.